Report: Luxury Consumers Continue to Invest in Home

Article
Dec 15, 2005

STEVENS, PA — Over the past twelve months, approximately six million luxury consumer households, or nearly 20% of the total affluent market, either bought a new or existing home or purchased a second/vacation home.
That’s the finding of a recently released survey conducted by Unity Marketing, a Stevens, PA-based market research firm, which conducts regular studies into the buying habits and product preferences of households with incomes among the top 25% of U.S. households – or $75,000 and above.

Unity Marketing’s latest survey among luxury consumers (1,153 consumers with an average annual income of about $142,000 and an average age of about 43 years) found that two-thirds were active in the home market in the past year – either buying a new, existing or vacation home or expanding, remodeling or redecorating their existing home. By comparison, the National Association of Realtors reports that just over 10% of existing homes across the country were sold in 2004.

And even more luxury consumers (69%) have major home-related plans in the coming year, including about 17% who plan on buying a new, existing or vacation home, Unity Marketing reported.

“Despite rising gas prices and the threat of a housing market slowdown, luxury consumers feel well cushioned,” said Pam Danziger, president of Unity Marketing and author of Let Them Eat Cake: Marketing Luxury to the Masses — as well as the Classes.

“The luxury consumers’ confidence is on the upswing, and fully 63% expect their personal financial situation to improve over the next twelve months,” Danzinger said. “Given the strong activity in home buying and major home-related improvements, Unity Marketing predicts a strong and growing demand for all things luxury for the home.”

According to the latest Census Bureau figures, the number of million-dollar homes in the nation’s housing stock has doubled over the past three years, while homes valued just below the million dollar mark ($500,000 to $999,999) have increased 120% during the same period.

While the typical luxury consumer lives in a home nearly two times larger than the national average (3,153 sq. ft. vs. 1,708 overall), a surprisingly small share of luxury consumer homes are equipped with the features typically associated with a luxury home, Unity Marketing noted.

For example, only 27% of luxury consumers’ homes have a luxury bathroom with top-line features and only 26% have a gourmet kitchen with top line appliances. That pattern is similar for other luxury products and features, both inside and outside the home, Danzinger said.

“That presents a significant opportunity for home improvement spending,” she pointed out. “If they don’t move up, we expect many of the luxury consumers who stay put to invest in major home improvements that will bring their already large and high-priced homes up to true ‘luxury’ levels.

“That will mean lots of homeowners redoing bathrooms and kitchens, and enhancing the outdoor garden and patio living areas,” she concluded.

Sunnyvale, CA — A recent survey indicates that American homeowners are overwhelmingly leaning away from new-home purchases in favor of remodeling the home they presently live in.

The survey, conducted this spring among 5,000 homeowners by Sunnyvale, CA-based remodeling expert Dan Fritschen, involved homeowners who felt under-served by their current living quarters. All participants were considering remodeling their existing home or moving to a different one. Participants had lived in their current home (with an average home value of $419,000) for an average of 8.5 years.

Survey respondents overwhelmingly stated that this will be their last big change in housing for a very long time. On average, they expect to stay in their current home, or the one they are about to move to, for 18 years.

“This is dramatically longer than all previous indications,” said Fritschen, author of Remodel or Move: Make the Right Decision, and founder of RemodelOrMove.com, a homeowner information and advocacy web site.

“The results are surprising, and indicate that people may not be as willing and able to pay for ever-increasing prices for new houses,” he said.

Among the survey’s findings were:

Fully one-third of those who plan to remodel will spend 30% of their home’s value on the project – much higher than the industry-standard recommendation of 20% or less

60% of the respondents feel their bathrooms are inadequate, 50% want an improved kitchen, and 50% want more rooms, such as dens and bedrooms

55% of those who are considering remodeling are “excited” about the idea, while 10% are “dreading” the process